An investigation into the water infrastructure development financial allocation pathways in municipalities

Expanded Title:

The Millennium Development Goals have established an international context within which South African macro socio-economic policies including RDP, GEAR and ASGISA have driven the rapid expansion of water and sanitation infrastructure over the past decade. Sectoral initiatives have been guided by the National Water and Sanitation White Paper, the National Water Strategy and the Strategic Framework for Water Services. A legislative framework has been established to regulate the process. National goals have been set within the water sector as well as in sectors where water is a key element such as health and education. These goals are all directed at themes such as poverty, employment and environmental sustainability. Financing the water infrastructure that is needed for achieving these goals is increasingly a key issue. Financing the water services sector must take account of the sector’s special and often unique attributes. Firstly, many role-players take financial decisions in the water services sector. Decision-makers are located in several national government departments, the water boards and local authorities. Secondly, there are many sources of finance including national government allocations, loans from public and private sector institutions and the budgets of local governments. Thirdly financial and human capacity within the sector to deliver services varies considerably. Because of the many institutions involved in all the processes, a complete picture of financing in the sector has not emerged.Past initiatives have focussed on specific aspects and / or been cross-sectoral with consequential generalisations in respect of the water sector. These include tariffing, routine decentralised budgeting, the Municipal Infrastructure Investment Framework and the feasibility studies undertaken to establish the financial viability of a national water resources infrastructure agency. The Water Research Commission too has financed a number of research projects. In order to analyse finances in the water services sector, this research project has postulated a value chain in water and sanitation services that envisages the adding of value through a number of sequential functions (or phases) as the technical and institutional arrangements change to match the challenges of each function. It regards “value” as a measure of the worth that is based purely on the utility derived from the consumption of a product or service. By value chain is meant the change in utility (expressed in monetary terms and partly as a tariff) as water services are delivered through the sequential processes from resource planning, abstraction, purification, distribution to reticulation and then through to waste water collection, treatment and discharge. The purpose of this analysis is, on one level, to guide policy formulation in the water services and municipal sectors and on another level, assist all decision-makers to be better informed in making financial decisions concerning matters such as financial grant allocations, tariffing, capital expenditure, operations and maintenance expenditure.

Date Published:

18/04/2011

Document Type:

Research Report

Document Subjects:

Water Resource Management/IWRM - Planning and development, Drinking water - Water supply